QUESTION
For the purpose of reducing the Canadian tax liability of an individual immigrating to Canada a non-resident trust is established either for the benefit of the immigrant, his spouse and children or exclusively for the benefit of his spouse and children. The non-resident trust which is exempted from the application of subsection 94(1) by virtue of subclause (b)(i)(A)(III) therof, will derive all of its income from assets that will be sold to the trust by the immigrant for fair market value consideration in the form of a non-interest bearing promissory note payable on demand. The immigrant will be neither the settlor of the trust nor a trustee. Does subsection 56(4.1) as amended by Bill C-18 tabled May 30,1991 in the House of Commons (the "Proposed Legislation") apply in these circumstances?
DEPARTMENT'S POSITION
Subsection 56(4.1) as amended by the Proposed Legislation will apply to any income derived from the trust by the immigrant's spouse and/or children in a taxation year.
Nothing in this response should be construed as Revenue Canada's views regarding the application of any other provisions of the Income Tax Act in respect of arrangement described in this question.
Prepared by: Olli LaurikainenDate: September 6, 1991